Sponsored

Self-Employed: Don't ignore the massive tax deduction benefit of depreciation!

Haupdate

Member
Joined
Nov 3, 2022
Threads
4
Messages
13
Reaction score
9
Location
Southern Maine/NH
Vehicles
Jan/Feb 23 R1T
First off: I am not a tax professional. Talk to your CPA.

With the R1T/R1S priced out for 2023 federal tax credits (for those without the contract pre-aug 22) and prices ever climbing, I wanted to remind those self employed individuals about depreciation.

Since the R1T and R1S are over 6k pounds, you can claim the entire purchase amount as a deductible expense in the first year! Then you deduct actual expenses for the years following versus milage (goes on the schedule C).

For example: You buy an R1T for 75k. You can deduct the entire amount in the first year as depreciation. If you are in the 22% tax bracket and use the vehicle 80% of the time for work, you could save $13,200! Remember, its not a credit, but its a nice deduction to be considered.
Sponsored

 

Davethadog

Well-Known Member
First Name
YaMa
Joined
Jul 15, 2021
Threads
16
Messages
455
Reaction score
915
Location
Denver
Vehicles
Trucks, bikes, excavators
S179 is good for a lot of things, but it’s not going to help you get a free truck.
 
  • Like
Reactions: Guy
OP
OP
Haupdate

Haupdate

Member
Joined
Nov 3, 2022
Threads
4
Messages
13
Reaction score
9
Location
Southern Maine/NH
Vehicles
Jan/Feb 23 R1T
The point was not to get into individual tax code...just a friendly reminder that it exists for those on the fence that wont qualify for the EV tax credit in 2023 for whatever reason.
 

Donald Stanfield

Well-Known Member
First Name
Donald
Joined
Jul 31, 2022
Threads
37
Messages
4,051
Reaction score
8,044
Location
USA
Vehicles
Rivian R1T, 2024 BMW i4 M50
Occupation
Stuff and things
The way this is written you need to justify why the vehicle is necessary for your business. No, driving to and from work doesn’t count. What this law was designed for are people who use vehicles as equipment to make money like service professionals.

For example if you are a contractor and you use your R1 to drive to customer’s homes carrying tools this is a legit deduction. If you’re a piano salesman and you use the truck to deliver pianos or are a caterer and use the truck to haul food and equipment to gigs you’re also good

If you work in an office or your business is a fixed location deducting vehicles tends to raise red flags with the IRS. There are two deduction types that tend to raise red flags with the IRS that is vehicle deductions and home office deductions.

Also keep in mind all those new IRS agents Biden hired need something to do, and auditing you is something for them to do. Personally unless you know about this deduction because of the business you already operate I’d leave this one alone.
 
  • Like
Reactions: Guy

Sponsored

Prime

Well-Known Member
Joined
Jul 18, 2022
Threads
11
Messages
1,112
Reaction score
1,114
Location
SoCali
Vehicles
Tesla MY(P), Rivian R1T
Dont know if this was already mentioned and I missed it but 2023 max depreciation that can be deducted from taxable income drops to 80%. 2022 was the last year you could deduct 100% and it subsequently drops 20% every year starting 2023.
 

DrMario

Member
Joined
Sep 13, 2022
Threads
2
Messages
18
Reaction score
18
Location
Thomasville, GA
Vehicles
Rivian R1T
There are limitations based as to who owns the vehicle. If I'm not mistaken, in order to do what was mentioned above the vehicle would have to be owned by the business and not the individual.
 

MinnR1S

Member
First Name
D
Joined
Mar 21, 2022
Threads
0
Messages
22
Reaction score
27
Location
CA
Vehicles
XC90 T8
Clubs
 
There are limitations based as to who owns the vehicle. If I'm not mistaken, in order to do what was mentioned above the vehicle would have to be owned by the business and not the individual.
Self-employed can own it as a personnel vehicle (not owned/titled by the company)
The main rules not clearly lists above the use of the vehicle.
Must have at least 50% business use mileage. Should also own for 5 years before selling to avoid recapture. Any profit you make on resale after 5 years has to be reported.
Best case you can get a car late in the year, drive it almost exclusively for work and keep the business portion high to get the most out of the first-year tax benefit.
You also need to show a profit to claim the tax benefit.

simple questions to ask yourself:
Am I self employed and qualify?
Am I going to show a profit on my taxes?
Do I drive more than 50% for work? (driving to work/office does not count)
Do I plan to keep this for 5 years and have the company going for 5 years?
Am I willing to keep a good log of my trips to show all my work mileage? (good to have incase you get called on the carpet)
Sponsored

 
 




Top